For a private investment fund, the employee benefits liabilities of any particular portfolio company may seem insignificant (relative to all of the fund's investments) and self-contained.
However, regulators and union-sponsored plans have taken the position that some types of employee benefits liabilities should extend to the fund on a "controlled group" basis. In such cases, the benefits liabilities of one portfolio company could impact the assets of another portfolio company. The U.S. Court of Appeals for the First Circuit recently agreed with this position in Sun Capital Partners III, L.P. v. New England Teamsters & Trucking Industry Pension Fund when it found that a private equity fund operated a portfolio company as a "trade or business" and not as a passive investment.
On August 8, 2013, Morgan Lewis presented a one-hour webinar discussing these potential hidden employee benefits liabilities and the consequences for private equity funds and their portfolio company investments in light of the Sun Capital decision.